• 10 hours China Targets Hong Kong As Cold War With US Heats Up
  • 1 day No Shirt, No Shoes, No Mask, No Service
  • 3 days Is Bitcoin Actually Worth The Energy It Uses?
  • 3 days Insurance Companies Are Turning People Away As COVID-19 Crisis Escalates
  • 3 days Mining Exploration To Drop By Nearly 30% Despite Gold Boom
  • 3 days Europe Set To Unveil Its $500 Billion 'Green Deal'
  • 4 days Major Diamond Mine Slashes Production
  • 4 days Social Security Could Dry Up In Less Than A Decade
  • 4 days Europe On The Brink Of Economic Crisis
  • 5 days Barrick Gold Launches Exploration Program In Japan
  • 5 days COVID-19 Is A Hacker’s Paradise
  • 5 days Why Big Finance Is Bailing On Fossil Fuels
  • 6 days A New Trade War Will Send Gold Even Higher
  • 6 days Could COVID-19 Lead To Authoritarianism?
  • 6 days The $30 Trillion Mega-Trend To Watch As Markets Bounce Back
  • 7 days Gold Soars To 7-Year Highs
  • 7 days From Smartphones To Smart VR Acquisition, Apple Pushes the Envelope
  • 10 days Why Covid-19 Won’t Kill The Renewable Revolution
  • 10 days COVID-19 Could Spark A Global Food Crisis
  • 11 days How To Play The Next Big Rally In Gold
Iran Faces Economic Meltdown

Iran Faces Economic Meltdown

Iran’s economy is melting down…

What Does Capitalism Look Like In North Korea?

What Does Capitalism Look Like In North Korea?

The entrepreneurial spirit is alive…

Fred Dunkley

Fred Dunkley

Writer, Safehaven.com

Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

Contact Author

  1. Home
  2. Markets
  3. Emerging Markets

Erdogan Fires Central Bank Head As Desperation Grows

Istanbul

The Turkish president is getting desperate. Not only does he have a rival for the first time in many years after his party lost elections in Istanbul, but the Central Bank has been trying to operate independently, as it should--but Erdogan isn’t having that.  On Saturday, Erdogan fired the country’s central bank governor, Murat Cetinkaya, over the same policy differences that have Trump threatening to replace the head of the US Federal Reserve, Jerome Powell. 

Cetinkaya did not want to cut interest rates. Neither, it seems, does Powell. 

That’s because central banks don’t take orders from presidents. They operate independently, until now. 

The fallout is ominous on a number of levels. 

Turkey’s economy slipped into recession earlier this year, and that hasn’t been good for Erdogan’s political prospects. 

Last year, Cetinkaya had raised the benchmark interest rate by 750 basis points in order to support the lira. He hasn’t touched it since then, but also refused demands from Erdogan and his son-in-law, the finance minister, to cut rates. When they demanded his resignation, he refused, citing the bank’s independence. So they fired him. 

Erdogan wants to control monetary policy, and his view of such contradicts what economic evidence has always showed us. The Turkish president strongly believes that inflation is caused by high interest rates. He also is convinced that interest rates are the work of the devil himself. 

Related: $40 Million In Bling Seized From Ex-Oil Minister

Investors aren’t keen on pouring money into an economy that doesn’t have an independent central bank. Even worse from an investor confidence perspective is a country whose monetary policy will be controlled by an individual with a very loose grasp of economics that includes deities. 

Turkey is drowning now in unemployment that has reached double digits, and inflation 

Erdogan himself laid the foundations for a recession, and while inflation eased a bit in June, compared to May, inflation still increased by 15.72 percent year-on-year last month. Last October, it topped 25 percent.

The languishing lira, for its part, lost another 2.1 percent against the dollar on Monday, after markets had a chance to respond to the central bank firing in early Asian trade. 

No one thinks this will end well--not least, for Erdogan himself. 

After losing Istanbul, his power base is shaken to the core, and Erdogan has been unable to respond coherently. 

On Monday, news emerged that a key ally in Erdogan’s ruling AK Party (AKP), former deputy prime minister Ali Babacan, resigned from the party over political differences and is planning to launch his own political movement. The message is clear that this is fallout from the central bank firing. 

As Erdogan boldly marches to what could very well be his undoing, all eyes are on Trump and the U.S. Federal Reserve, within which a similar story is unfolding. 

Late last month, Trump doubled down on criticism of Powell, telling Fox Business that he would be willing to replace the head of the central bank who was “sucking [money] like from a vacuum cleaner”. He suggested that he had “made” Powell, and could unmake him just as easily. 

By Fred Dunkley for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment